LNG imports remain high at Mexico's Manzanillo terminal

Mexico's Central region, which includes Mexico City, has increasingly relied on imports of liquefied natural gas (LNG) at the Manzanillo terminal to meet its growing natural gas demand because of bottlenecks on the pipeline system that supplies this region. The Los Ramones Phase II South pipeline, commissioned in July 2016, was expected to alleviate natural gas shortages in the Central region and gradually displace LNG imports at the Manzanillo terminal. However, since the start of partial service, the Los Ramones Phase II South pipeline has reportedly experienced technical problems. Currently, both North and South segments of Phase II of Los Ramones pipeline operate at a capacity of 400 million cubic feet per day (MMcf/d), significantly below the nameplate capacity of 1,430 MMcf/d, according to Mexico's Secretaria de Energia. As a result, the Central region remains dependent on LNG imports to balance its supply.

Manzanillo is the most utilized of Mexico's three regasification terminals. Its unique point of entry on the Pacific coast in the Central West region of Mexico bypasses several domestic pipeline bottlenecks and allows imported natural gas to reach customers in the Central region. In 2016, because of continuous natural gas supply shortages in the region, LNG imports at Manzanillo increased by an average 30% in the second and third quarters, compared with the same periods in 2015, and by 62% in October year-on-year, according to IHS data.

Mexico meets almost half of its natural gas demand with imports. Mexico's pipeline imports from the United States have increased significantly, and in 2015, accounted for 80% of Mexico's natural gas imports. Lower-priced natural gas from the United States is gradually displacing LNG imports, particularly at the Altamira terminal where LNG imports declined by 72% in January–November 2016 compared with the same period last year. With the projecteddoubling of the U.S. border-crossing pipeline capacity into Mexicoover the next two years and the expansions on Mexico's domestic pipeline network, natural gas exports from the United States will continue to increase.

The United States became the largest LNG exporter to Mexico in November and may continue to supply LNG to the Manzanillo terminal if natural gas shortages in the Central region persist and pipeline deliveries on Los Ramones Phase II South continue to be delayed. With the recently expanded Panama Canal, the one-way voyage from Sabine Pass to the Manzanillo terminal has been reduced from 27 days around Cape Horn to 10 days through the Panama Canal. Historically, Manzanillo terminal has been primarily supplied by LNG exports from Peru. In 2016, since the opening of the expanded Panama Canal, the Manzanillo also received LNG shipments from the Atlantic Basin suppliers including the United States, Trinidad and Tobago, and Algeria.

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